Rates as of 0500 GMT

Market Recap

A confusing day! European stock markets were mixed, US stocks higher, and Asian stock markets mixed today too none up too much, none down too much. Yet the FX market showed a distinctly riskoff pattern more consistent with a deep rout in equities. The safehaven JPY, CHF, and USD were the topperforming currencies and the commodity currencies were at the bottom, with one exception in last place was EUR following the European Central Bank ECBs decision to hike rates by twice what the market expected 50 bps instead of 25 bps. Go figure!

Lets start with the surprise ECB move. The Governing Council decided to frontload its exit from negative interest rates with a 50 bps hike in all three of its rates, its first hike in 11 years. This ends eight years of negative interest rates in Europe, the period of the lowest rates in recorded history.

The Governing Council also announced an addition to its evergrowing portfolio of acronyms the Transmission Protection Instrument TPI. This is the longawaited antifragmentation tool. It will allow the Eurosystem to make secondary market purchases of securities issued in jurisdictions experiencing a deterioration in financing conditions not warranted by countryspecific fundamentals. The TPI can be activated to counter unwarranted, disorderly market dynamics that pose a serious threat to the transmission of monetary policy across the euro area. In order to determine whether it can use the TPI, the…